Meanwhile, Yorkshire-based menswear retailer Greenwoods went into liquidation less than 18 months after being rescued from administration. In the wider retail industry, the biggest news came from HMV, which became the first casualty of a slump in Christmas trade after it collapsed into administration for the second time in six years.

Retailers’ cash positions are much weaker than they should be

Richard Hyman, retail analyst

Hyman attributes his gloomy prophecy to 2018’s “golden quarter that turned out to be the weakest Q4 since the debt crisis kicked in”, so retailers entered the first quarter of this year in far worse shape than 2018.

“Retailers’ cash positions are much weaker than they should be,” Hyman adds. “Mike Ashley may not be everyone’s cup of tea but he hit the nail on the head when he said November was the worst November for retailers in living memory.”

Better the devil you know

The silver lining – and you have to really want to see it – is that the factors contributing to a potentially distressing year are the same as those in 2018. It is a case of “better the devil you know”, as retailers and industry experts point to well-worn problems: an oversupply of physical stores, business rates, declining footfall, low consumer confidence, rise in operating costs, legacy debt and – the big one – Brexit.

“The expectation for 2019 hinges a great deal on Brexit and whether the agreement is accepted by parliament or not,” says Kate Ormrod, lead analyst at GlobalData. “Obviously, by [the vote on] 14 January, we’ll know more, but if the deal is accepted, it will clearly provide more certainty for UK consumers and retailers alike. A no-deal Brexit or delayed withdrawal will almost certainly lower consumer confidence further and inhibit spending on categories such as clothing and footwear.” Ormrod cites Arcadia Group’s fascias, Bonmarché, Gap and New Look as “at risk”, but adds that “there are plenty of retailers doing well like Primark, Zara, TK Maxx and JD Sports, so it’s not all doom and gloom”.

The oversupply of physical stores and legacy debt is not sustainable

Paul Martin, head of retail at KPMG UK

Paul Martin, head of retail at KPMG UK, believes that no one is safe: “Across the entire retail sector footfall is down to pre-crisis levels, online performance is weakening and KPMG’s retail sales monitor shows that, despite Black Friday, there was a slowdown in November. It’s clear that few retailers are in for an easy 2019.

“We are at the beginning of a significant change in the retail landscape that has been in making for a number of years. It is down to an array of forces, from Brexit, of course, to regulation to changing consumer lifestyles. The oversupply of physical stores and legacy debt is not sustainable.”

Schuh managing director Colin Temple puts this into context by warning “highly geared” retailers such as House of Fraser and Debenhams: “Cash is king and fashion can be very fickle. If you don’t have the hot product and have a lot of borrowing, then you’re in trouble. Retailers in the middle are also feeling it more with tighter consumer spend. You can’t pass the cost on to the consumer, so you have to think of new ways to serve them and be more efficient.”

Close calls

Data from AlixPartners shows that last year British retailers closed almost 6,000 stores – the largest number since 2010.

“In our view there is every possibility that this number could be repeated and indeed perhaps increased upon,” says managing director Sanjay Bailur. “The main contributory factors are well documented but nonetheless remain challenging to address: rising input costs, ever-diminishing margins, an excess of retail space, an inexorable move to online across all sectors, and all against a backdrop of consumers making it clear they intend to rein in their spending in the face of Brexit and wider political uncertainty.

“As the past couple of years have shown, nobody is immune, including online businesses and those that we would term ‘born digital’.”

First aid

Retailers are calling for urgent action to help the high street.

Moss Bros chief executive Brian Brick argues for a revaluation in business rates: “That would have a direct impact. The system is archaic, and the last rates revaluation was ridiculous. It will be a challenging year, but everyone has opportunities within their business.”

Richard Lim, chief executive at Retail Economics, agrees, and points to the £7.5bn in business rates the retail industry paid last year. Looked at in a different way, with every £1 spent on corporate tax £2.30 is spent on business rates.

“Retailers are looking at disposing of stores or repurposing them to make them more experiential,” Lim adds. “There are retailers which continue to thrive, such as Boohoo and the UK arm of Asos. The common theme is understanding their customer, the evolution of their customer journey and how technology has influenced that, and sophisticated digital strategies that utilise customer data.”

Nobody is immune, including online businesses and those we would term ‘born digital’

Sanjay Bailur, AlixPartners

London-based Joe Rohrlich, executive vice-president and general manager EMEA at Bazaarvoice, a rating and reviews platform, believes Amazon’s latest venture towards bricks-and-mortar stores signals a new beginning for the high street with a greater focus on the retail experience: “Regardless of price, customers want great experiences both on and offline, and it’s up to brands and retailers to capitalise on this through 2019. Retailers need to be thinking more about how online trends and information can improve the physical experience. This could take the form of digital fitting rooms, product customisation, or store associates who can pull up information on previous purchases or saved items.

“Those who prioritise this kind of insight, along with wider customer content such as style and fit suggestions, will get ahead of the competition in establishing shopper loyalty. It’s something we’re already starting to see, with the launch of Amazon’s new ‘four star’ store concept, which promises to stock only the products that are best rated among shoppers.”

Or, to quote KPMG’s Paul Martin, “Winning over the consumer is the only way to thrive.”

The Drapers Verdict

New year, same problems. But the difference between 2019 and 2018 is the cumulative effect of the factors contributing to what is already shaping up to be a difficult year. If a revaluation of business rates were not so critical, we would be bored of discussing it, given how long the debate has raged on. Ditto Brexit.

What this shows is that, although the industry must continue to lobby government, retailers cannot wait for politicians to effect change. Success will only come from within, to those brave enough to innovate and make changes for the long term. Consumers will only part with their cash if they are confident of getting something useful or unique: a pair of socks or a standout dress of the highest quality and design, delivered quickly and at the right price, that will have others talking about it. It is survival of the fittest.

Readers' comments (2)

Temple states 'You can’t pass the cost on to the consumer'. Rubbish! You can and you should. Retail isn't charity status and margins must be maintained. Customers will pay full price for the right product in the right environment. Fact.

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